FDIC Begins Implementing GENIUS Act with Stablecoin Issuer Application Rules

Highlights:

• FDIC has set a clear path for banks to apply for stablecoin approval under a new framework this year.
• Banks must submit detailed applications covering governance and controls under the FDIC safety standards.
• FDIC expects limited early participation, while public comments will guide final stablecoin rules for supervised banks.

The Federal Deposit Insurance Corporation has approved a notice of proposed rulemaking focused on bank-issued payment stablecoins. The decision came during a board meeting held earlier this week. The proposal outlines how FDIC-supervised banks may apply to issue stablecoins through subsidiaries. Additionally, the agency has opened a public comment period before finalizing the rule.

FDIC RELEASES FRAMEWORK ALLOWING U.S. BANKS TO ISSUE PAYMENT STABLECOINS UNDER GENIUS ACT

The FDIC has unveiled a regulatory framework detailing how U.S. banks and their subsidiaries can gain approval to issue payment stablecoins under the GENIUS Act.

The guidance outlines… pic.twitter.com/BGXwb2jZW0

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The framework introduces a formal approval process for interested banks. Each applicant must submit a detailed explanation of proposed stablecoin activities. These filings must describe governance structures and internal control systems. Moreover, banks must explain how they will manage reserves and daily operations.

FDIC counsel Nicholas Simons addressed the board during the meeting. He said the framework allows regulators to assess risks while limiting unnecessary regulatory burdens. The agency wants clear insight into ownership and control structures. It also requires banks to outline operational safeguards.

Applicants must also submit engagement letters with registered public accounting firms. These letters confirm audit preparedness from the start. Regulators consider independent audits essential for accountability. Therefore, the proposal places strong emphasis on financial transparency.

The FDIC plans to evaluate applications using safety and soundness standards. Officials said the agency does not intend to discourage innovation. However, it will deny proposals that pose material risks.

FDIC Proposed Approval Aligns with GENIUS Act Stablecoin Requirements

The suggested framework is based on the needs outlined in the GENIUS Act signed earlier this year. The law requires complete support of payment stablecoins in dollars or other equally liquid assets. It also imposes audit responsibilities on large issuers. The FDIC, therefore, designed the proposal to fit in these legal standards.

Acting FDIC Chair Travis Hill has discussed implementation plans with lawmakers in recent weeks. He said the agency would roll out guidance in stages. During the board meeting, he confirmed upcoming rules on capital and liquidity. These requirements will apply after issuer approval.

LATEST: 🇺🇸 Travis Hill, the acting chief of the FDIC, says the US banking regulator plans to propose a framework for implementing the GENIUS Act stablecoin legislation before the end of the year. pic.twitter.com/RejyG8LADg

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Hill described the regulatory approach as tailored and flexible. He said the FDIC will assess risks without imposing unnecessary restrictions. Regulators plan to rely on established banking oversight models. As a result, stablecoin subsidiaries will face familiar supervisory expectations.

The proposal also outlines ongoing compliance duties. Approved issuers must follow anti-money laundering requirements. They must also comply with sanctions laws. Regulators expect banks to integrate these controls into stablecoin operations. The FDIC emphasized that approval does not end supervision. Instead, it begins continuous oversight. Capital and risk management standards will evolve over time.

Regulator Expects Limited Early Bank Participation

The FDIC anticipates a small number of early applicants in the new GENIUS Act framework. Officials estimate approximately ten applications per year at the beginning. This forecast signifies conservative curiosity among financial institutions. There are numerous institutions that are still evaluating the use of stablecoins.

Large banks are already experimenting with payment applications. These initiatives center on speedy settlement and reduced transaction expenses. Early testing has been facilitated by collaborations with crypto companies. Nevertheless, the majority of banks are still in the assessment phase.

The final rule will be subject to public feedback. The FDIC will analyze the comments in the next few months. Authorities intend to streamline requirements prior to adoption. The procedure is one of the steps toward the introduction of stablecoins into regulated banking operations.